[This story is running in the print edition of The Seattle Times July 19, 2013.]

Microsoft CFO Amy Hood (Photo from Microsoft)

Microsoft missed big in the fourth-quarter earnings it reported Thursday — hit especially hard on the sales side by the slumping PC market and on the profit side by a write-down in the inventory of Surface RT tablets.

Also a factor was Microsoft’s shift in how it sells some of its products, most notably Office. The company is moving away from selling traditional software licenses, where people pay a licensing fee upfront, toward a subscription model, where people pay in installments over time.

For the quarter ended June 30, Microsoft posted revenue of $19.9 billion with earnings per share of 59 cents on profit of $4.97 billion. Those figures reflect a $900 million write-down of Surface RT inventory related to a price-reduction offer for those devices.

Adjusted for that write-down, Microsoft says earnings per share would be 66 cents.

That still would have fallen short of analysts’ expectations of $20.7 billion in quarterly revenue and earnings per share of 75 cents.

All of these trends — the PC sales decline; Microsoft’s shift toward subscription fees and cloud-based services; and lukewarm demand for Windows 8 in general and the Surface tablet in particular — have “been building up for some time,” said David Cearley, an analyst with research firm Gartner.

“Some of it seems to have come to a head” in the fourth quarter, he said.

For the fiscal year, Microsoft also fell short of analysts’ estimates, posting revenue of $77.85 billion, profit of $21.86 billion and earnings per share of $2.58.

Analysts had expected revenue of $78.69 billion and earnings per share of $2.75.

Microsoft shares took a hit after the earnings report came out, trading after hours Thursday at $33.21, down $2.23, or about 6.3 percent.

Up from last year

Still, the fourth quarter and fiscal year results were up from last year’s.

In the fourth quarter of last year, Microsoft posted revenue of $18.06 billion, net loss of $492 million, and loss per share of 6 cents.

Those figures reflected some unusual events such as a write-down of the 2007 acquisition of online ad company aQuantive and deferred revenue from a Windows 8 upgrade offer.

Adjusting for those items, Microsoft had fourth-quarter 2012 revenue and earnings per share of $18.6 billion and 73 cents.

For the full year 2012, the company posted revenue of $73.7 billion and earnings per share of $2 on profit of $16.98 billion. (Those figures include the aQuantive write-down and deferred Windows 8 upgrade offer revenue.)

Continuing trends

“In many ways, our fourth-quarter trends continued many of the trends we’ve seen earlier this year,” Amy Hood, Microsoft’s chief financial officer, said during a conference call with analysts Thursday afternoon.

One such trend is the continued decline in PC shipments, which several research firms said dropped 11 percent in the second quarter from a year ago.

Hood, who became CFO in May, also acknowledged the difficulties Microsoft is facing in what some call the “post-PC era” and what Microsoft likes to refer to as the “PC-plus era.”

“We are working to transition the business into this modern era of computing,” Hood said. “Given the complexity of the ecosystem, this journey will take time.”

Hood touted some of the company’s accomplishments, including a record $22.4 billion in unearned revenue — basically, money corporations have committed to Microsoft via multiyear licenses.

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Welcome to Microsoft Pri0: That's Microspeak for top priority, and that's the news and observations you'll find here from Seattle Times technology reporter Matt Day. Send tips or comments to mday@seattletimes.com.